Interest on Housing Loan Tax Benefits and Deductions – Sec 80EE and 24(b)

Considering the need in affordable housing for the citizens, P Chidambaram introduced additional benefit for the first-home buyers by inserting section 80EE with respect to “Interest on Housing Loan” which is in addition to the existing provision (Sec 24 (b)).

 

HOUSING LOAN TAX BENEFIT CALCULATOR

Principal Paid

Interest
(Paid during F.Y. 2014-15)

Interest already claimed as deduction u/s 80EE in the previous year



DEDUCTIONS FOR THE FINANCIAL YEAR 2014-15 (ASST. YEAR 2015-16)

80 C Deduction

Interest deductible u/s 24(b)

Interest deductible u/s 80EE

 

 

Existing benefits under other sections in Income Tax Act of Similar Nature:

  1. 24 (b) already provides for deduction of interest payable on capital borrowed for acquisition, construction, repairs, renewal and reconstruction of property while computing income under the head Income from House Property.
  2. In case of capital borrowed for acquisition or construction of self-occupied property, or a property which cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him, the amount of deduction under section 24(b) is restricted to Rs 1,50,000 for the Asst. Year 2014-15 and the restriction has been increased to Rs. 2,00,000 from the Asst. Year 2015-16 on wards.

 Note: 24(b) and the new deduction u/s 80EE are on Interest element in repayment of housing loan, the principle element in the housing loan is allowed as deduction u/s 80C

New Section 80EEApplicability, Conditions & Calculations of the New Section:

Applicability:

The New section provides for deduction of interest payable on loan taken by an individual assessee while calculating his total income if all the following 4 conditions are satisfied:

 

 Date of Loan Sanctioned The loan is sanctioned by the financial institution during the period 1.4.2013 – 31.3.2014
Loan Amount The loan sanctioned for acquisition of the residential house property should be less than or equal to 25 Lakhs
Provided The Assessee does not own any other residential house property on the date of sanction of the loan.
Value of the House Property Should be less than or equal to 40 Lakhs

Loan borrowed from Financial Institution alone are allowed as deduction and Financial Institution includes:

  1. Bank or
  2. Banking Institution or
  3. Housing Finance Company Formed and Registered in IndiaTherefore Interest on loan borrowed from Relative, friends or any other person will not be allowed as deduction.

 

Maximum Limit:

The deduction under section 80EE shall not exceed Rs. 1,00,000/-

Illustration:

A

Interest on housing loan paid/payable for the period 1.4.13 to 1.3.14 2,70,000

B

Maximum Interest allowed under section 24(b) 1,50,000

C

Balance (A-B) to be considered for deduction u/s 80EE subject to a Maximum Limit 1,20,000

D

Maximum Interest allowed as deduction under this section i.e., 80EE 1,00,000

No deduction available for the remaining Rs. 20,000/- (1,20,000-1,00,000)

 

Carry Forward To Next Asst. Year:

In case the deduction amount was less than Rs. 1,00,000 in the Asst. Year 2014-15, then the unutilized deduction amount is allowed as deduction in the Asst. Year 2015-16 as explained in the following illustration.

Illustration:

Asst. Year 2014-15

A

Interest on housing loan paid/payable for the period 1.4.13 to 1.3.14 2,10,000

B

Maximum Interest allowed under section 24(b) 1,50,000

C

Balance (A-B) to be considered for deduction u/s 80EE subject to a Maximum Limit  for the Asst Year 2014-15 60,000

D

Interest allowed as deduction under this section i.e., 80EE for AY 2014-15 60,000

E

Balance deduction not utilized in Asst. Year 2014-15 carried forward to Next Asst. Year (1,00,000 – D) 40,000

 

Asst. Year 2015-16
A If the Interest on hous­ing loan paid/payable for the period 1.4.14 to 1.3.15 2,50,000
B Maximum Interest allowed under section 24(b) (AY 2015-16) 1,50,000 2,00,000
C Balance (A-B) 50,000
D 80EE Deduction
[Brought Forward (“E” from above table) unutilized deductible amount from AY 2014-15 to AY 2015-16]
40,000
                              No deduction available on Remaining (C-D) Rs. 10,000 /- for AY 2015-16

Do you have anything to ask or add to it, then feel free to comment below.

Last Updated: 28th January 2015

Dilip Kumar

+Dilip Kumar (Author and Editor of The Tax Info) is a CA Student from Hyderabad, Loves Blogging on Tax related matter.

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One thought on “Interest on Housing Loan Tax Benefits and Deductions – Sec 80EE and 24(b)

  • January 25, 2014 at 6:19 am
    Permalink

    Hi Dilip,

    Thanks for the Detailed information.

    I am a first Home Buyer and I took a Housing Loan of 1400000/- on Mid-April 2013 and below are my interest & Principle details payable FY2013-14 as of my Provision IT Certificate…

    And it is self-occupied ….

    Interest — 129361/-
    Principle — 31611/-

    So as the information you have provided, the sec, 80EE would not be applicable to me !!!!!
    So i have to fill my returns under sec. 24(B) only !!!

    Can you please let me know how i file the returns and how much can i be reimbursed …..

    Thanks,

    Reply

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